First principles for buying second-hand
There is a shortage of used cars, and prices are rising. But now may be a good time to shop for a secondhand car
Use it: If you want to find your ideal second-hand car, you need to do your homework and do the legwork. Photograph: Chris Ratcliffe/Bloomberg
Let’s put current car sales into some context. The Irish motor trade has been cock-a-hoop since January of this year when it became apparent that new car sales were on something of a rebound, having been desperately depressed since the financial crash of 2008. So far this year, you, the Irish car buyer, have bought around 65,000 new cars – a rise of in and around 30 per cent. Even in the best year the industry ever had, 2000, the peak of the market was 247,000 new cars.
Which sounds like a lot, until you realise that between January and April of this year, 368,271 second-hand car transactions have taken place. That represents, according to Cartell.ie, a rise of around 19 per cent on the 308,243 total for the same time last year.
That is in spite of a serious hardening of used car values, which you would think would be freezing many people out of the market. We learned last week from Motorcheck.ie that between 2010 and 2014, used car values have risen by 32 per cent, or, to put it in raw money terms, as much as €2,300 depending on which make and model you are looking at.
Don’t go thinking that this rise in second-hand prices is affecting only the premium end of the market either. In fact, proportionally, it is the small, reliable runarounds – the likes of the Toyota Yaris and Nissan Micra, that have risen the most.
Why? Simply down to good old (or bad, depending on whether or not you’ve read your Marx) supply and demand. We started buying fewer and fewer new cars from 2009 onwards, so there is a scarcity in the market of cars from that point on. Scarcity drives up values and so prices are holding firm, or even rising, for cars from that period.
So, presumably, the smart money is on holding off your purchase. If the new car market is recovering then the used car market supply will eventually follow suit, surely? That means prices have to drop at some stage.
Not so fast. According to Cartell.ie’s Jeff Aherne, there is more to the calculation of when to trade in than merely the price on the sticker.
Stock level shortage “In an ideal world it would be nice to be able to hold off until used car values fell again. But as the economy grows, I doubt we will see an easing in stock level shortage or pricing in the near future,” says Aherne. “It is also relative, in that your own car, albeit older, is worth that little bit more, just as the newer vehicle is. People must look at the age of their own vehicle and do a cost benefit analysis of buying a newer one. On their current car, is the tax higher? Or the fuel economy worse? Or indeed, are there any big jobs due, such as the timing belt? Also, as their current car ages, it is more likely that non-maintenance items such as pumps, turbos etc will fail, and these can be costly. I think now is the time to change as long as your budget allows it and you get a decent warranty on the used vehicle.”
Many have been turning to the UK market for value and availability, and the savings to be made from buying overseas can occasionally be staggering. Irish-based dealers claim to be catching up with the value offered in the import market, though, according to Nigel Brennan of dealers Hutton & Meade.
“I suppose our business model is a bit different to some others. We aim for a high-volume, low-margin model and that means we have to be able to compete on value with those importing directly,” says Brennan. “So if, for instance, the price of a given car is around €12,000 we would sell that for €13,000. Half the extra would be lost in transport costs of getting yourself to the UK and bringing the car back, and the other half is down to the warranty we offer on all of our models, plus the peace of mind – we just wouldn’t bring in a car with a less-than-reputable background.
Void of availability “Most of our business now is in the 2010, 2011 and 2012 models, but there is a void of availability in the 2007-2009 model years. Still, though, you actually get better value by buying a 2010 car, say, because of the scarcity of the others; and besides, the history starts to become questionable at that age.”
Even with the temptations of the UK market, and even given that the number of imports are up by 24.5 per cent this year, the actual physical number of vehicles imported (25,091 units) is still dwarfed by the sheer number of used car sales. That, if nothing else, shows we are still keen to shop at home.
Susan Smyth is one such buyer. An IT entrepreneur, living in the west of Ireland, she recently bought a second-hand Jaguar XF and has nothing but praise for the efforts expended by the dealer she purchased from.
“I bought the car from an Irish dealer, although I did check UK prices first, I have imported from the UK in the past and yes, I did consider doing it again. However, I was very pleasantly surprised with the price and when compared with UK prices, coupled with VRT, travel etc, there was very little difference. My experience buying the car was an absolute pleasure. I was given the freedom to test drive by myself and I fell in love with the vehicle immediately. There was no hard sell needed; I knew what I wanted and what I was willing to pay.”
So is there any used car magic bullet? Any sure way to get maximum value with minimal hassle? Not really, I’m afraid. As with most purchases, it’s all about two kinds of work: home and leg. The only safe advice is to buy the most recent car you can, from the most reputable source, with the best possible history, and make sure you get a good warranty with it.